What are the Best Tips for ETF Trading?

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  • Written By: A. Leverkuhn
  • Edited By: Andrew Jones
  • Last Modified Date: 22 August 2019
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Each investor or trader has their own best strategies for ETF trading, but some of the most common suggestions involve recognizing key details and tactics for getting the most out of these financial products. Exchange traded funds, or ETFs, are relatively new financial instruments. They can focus on a lot of different areas, from commodities and currencies to stocks, bonds, and indexes, but they have some core aspects in common.

ETFs are basically bundles of equities that can be easily traded and monitored online or through other daily communications. ETF trading is a lot like trading individual stocks. The ETF will have a historic price chart that looks somewhat like a price chart for a stock. The difference is that an ETF will have different kinds of volatility because it is a more complex product composed of various stocks or other equities.

One of the best overall tips for ETF trading is to allocate money, and have a long term strategy. Just like with stock trading, investors should avoid trading with money they will need in the short term, or worse still, trading “on margin,” where some brokerages allow for placing trades essentially on credit. Along with savvy allocation of capital, the best ETF traders have a precise strategy for the amount of gains they want out of an ETF, after which point, they will cash out, a move finance pros often refer to as “profit taking.”


Other tips for ETF trading involve using special tools provided by brokerage accounts. Investors can use a “limit order” to control the price of the trade. Stop losses can help hedge against big immediate losses. All of this is part of learning about trades for stocks, ETFs, and funds are commonly done. Investors can also use other special tools like candlestick charting to try to zero in on the moves that an ETF is likely to make in the future.

Another great tip for ETF trading is to track progress relentlessly. Just like individual stocks, many ETFs can experience a lot of volatility over a short period of time. Some of them are specifically built to mirror the prices of their underlying assets. Although these may be more stable than a single stock, they will generally not be as stable as the broadest index funds that are carefully built to limit gains and losses. It is essential not to lose track of the money that an ETF is making, or losing, for every single trading day. One of the best features of these products is that they can be sold (or bought) in intraday trading, which helps investors who want to make detailed short term plays on an ETF.


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